FCA rules
Under FCA rules, consumers have a right to cancel certain contracts typically within 30 days of entering the contract, if they change their mind. However, the right to cancel does not arise in all circumstances and a consumer accessing tax-free cash in itself does not trigger cancellation rights under FCA rules. Also, the FCA rules do not exempt firms from HMRC requirements.
Under the Conduct of Business sourcebook (COBS) 15.2, cancellation rights apply when a consumer enters certain specified contracts. In the pensions and retirement space, specified cancellable contracts include a pension transfer contact and a contract to join a personal pension scheme. A contract allowing a person to take a Pension Commencement Lump Sum (PCLS), sometimes known as a tax-free lump sum, is not listed as a cancellable contract in COBS 15.2 so a contractual term allowing someone to take a PCLS does not of itself trigger cancellation rights.
The remainder of the statement discusses taking a PCLS. In particular the FCA states that:
- FCA rules do not prevent a pension provider from choosing to offer cancellation rights in their contracts in additional circumstances beyond those set out in FCA rules. Firms will need to consider the implications of tax legislation when voluntarily offering cancellation rights.
- Where a consumer has taken a PCLS and then wishes to return that money to a pension, tax legislation will affect what firms and their customers are able to do and whether a consumer will incur a tax charge. HMRC’s newsletter provides further information.